Coffee Market Report March 26 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net short sold position within the market by 9,54% during the week of trade leading up to Tuesday 20th. March; to register a net short sold position of 57,373 Lots on the day. This net short-sold position which is the equivalent of 16,264,991 bags has most likely been further increased, following the period of mixed but overall more negative trade, which has since followed. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market increase their net short sold position within this market by 43.73% during the week of trade leading up to Tuesday 20th. March; to register a net short sold position of 16,999 Lots on the day.  This net short sold position which is the equivalent of 2,833,167 bags is most further increased, following the sharp selloff on Friday, which ended a week of mixed trade. 

Friday was a dismal day for coffee producers, as the terminal markets came under steady selling pressure for the day against the continued bearish sentiment that comes with the forecast for a significantly larger new Brail crop for this year, which is not being countered by any form of supportive news.   Weather one would say is the only issue that could in some way come to the fore to support the markets, but for the present global coffee weather is largely neutral and is further supportive for good growing conditions for all the producer blocs.  

Perhaps the only supportive factor that one might speculate on is the longer-term possibility for the soft farm gate prices for many if not most coffee farmers, shall reduce investment into farm inputs and have some negative impact upon forecasts of longer term yields.   But this really is a possibility that might only come to the fore late in the year and in the meantime, the coffee producers are having to live with terminal market reference prices that equate to loss making prices for many farmers for their new crop coffees. 

While in a bid to halt the slide in value of coffee, the Colombians are proposing a global producer retention of 5% of coffee production.    But for many producers this would not be an affordable option for their governments to finance and one might speculate that when discussed during the International Coffee Organisation summit meetings in Mexico next month, that nothing much shall be forthcoming from this proposal.   

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 40.54 usc/Lb., while this equates to 34.59% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,105 bags on Friday; to register these stocks at 1,936,267 bags.  There were meanwhile a larger in number 4,235 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,935 bags. 

The commodity markets were mixed in trade on Friday, but with the overall macro commodity index managing to take a modest positive track for the day.   The Oil, Cocoa, Wheat, Corn, Gold and Silver markets had a day of buoyancy, while the Natural Gas, Sugar, Coffee, Cotton, Copper, Orange Juice and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% higher; to see this index registered at 424.30.  The day starts with the U.S. Dollar steady and trading at 1.416 to Sterling, at 1.236 to the Euro and with the dollar buying 3.313 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 69.05 per barrel. 

The London and New York markets started the day on Friday on a softer note and with both markets remaining south of par, into the early afternoon trade.   As the afternoon progressed both markets started to come under further pressure and with sell stops being triggered, to accentuate the losses.   Both markets did however manage to attract some modest support and the lows and to make a partial recovery, ahead of an overall soft close for the day and the week. 

The London market ended the day on a negative note and with 73.2% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 72% of the earlier losses of the day intact.    This mixed close does not inspire much in the way of confidence, but perhaps with the evidence of the increased speculative net short positions within both markets which have likely been further increased since Tuesday last week, there shall be some degree of caution and a hesitant steady start due for early traded today against the prices set on Friday, as follows: 

LONDON ROBUSTA US$/MT                        NEW YORK ARABICA USc/Lb. 

MAR   1741 – 48

MAY   1690 – 52                                              MAY    117.20 – 1.80

JUL    1721 – 49                                               JUL    119.40 – 1.80 

SEP    1725 – 47                                              SEP    121.70 – 1.70

NOV   1729 – 46                                              DEC    125.15 – 1.65

JAN    1734 – 43                                              MAR   128.65 – 1.60

MAR   1746 – 41                                              MAY   131.00 – 1.45

MAY   1760 – 40                                               JUL    133.10 – 1.40

JUL    1774 – 38                                               SEP    135.00 – 1.30

SEP    1787 – 36                                               DEC   137.75 – 1.25